SINGAPORE (Nov 26): The Tantallon India Fund closed down -2.31% in October, after expenses, with the rupee depreciating 2% versus the US dollar. Given the extent of the selloff in global equities over the course of the month, it did feel like a small victory to see the portfolio recover strongly into month-end on the back of our portfolio holdings starting to report strong September quarter earnings, well ahead of consensus expectations. Fundamentals are starting to re-assert themselves, and the selloff in crude has certainly helped buoy local investor sentiment.

Fragile global investor sentiment notwithstanding, we remain steadfast in our conviction on India’s secular tailwinds: continued strength in high-frequency data, credible inflation-targeting monetary policy, transparent policymaking encouraging the commitment of risk capital and sustained domestic investor flows as a back-stop for valuations. We would continue to make the case for investors to take advantage of the selloff, and invest in Indian equities on a structural, longer-term view.

Taking a step back for a moment to reflect on some of the market anomalies setting prices currently:

  • Khashoggi’s murder, and the subsequent selloff in crude prices. US President Donald Trump would finally seem to have the leverage to “encourage” the Saudis to increase output, offsetting any supply shortfalls from the sanctions imposed on Iran. It is a breather for the beleaguered Indian rupee, especially given that India seems to have received a “waiver” to continue to import Iranian crude.
  • US Congressional gridlock is now official. The wry commentary suggesting that we are now past the “smoothest” part of the Trump presidency does portend a more challenging outlook for the US dollar, despite the US Federal Reserve staying firm on its tightening course. Good news, perhaps, for emerging markets and emerging-market currencies.
  • The trade wild card looms uncomfortably in front of us. As national security concerns blur the lines between defence and commerce, and given the inherent propensity for “strong man” posturing on both sides, a protracted US-China face-off would seem to be on the cards. Perhaps China President Xi Jinping and Trump will signal a truce of sorts at the G20 summit at the end of the month. Realistically, we should expect more volatility as markets are forced to digest unpredictable policy rhetoric/behaviour, exacerbating the myriad (growth) concerns on China.

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